Crs Auto Parts, Inc. v. National Grange Mut. Ins.

• Decision Date: 03 February 2009
• Docket Number: Civil Action No. 08-2022.
• Citation: 645 F.Supp.2d 354
• Parties: CRS AUTO PARTS, INC., Plaintiff, v. NATIONAL GRANGE MUTUAL INSURANCE COMPANY, Defendant, Turley Insurance Agency, Inc., Third-Party Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

645 F.Supp.2d 354

CRS AUTO PARTS, INC., Plaintiff, v. NATIONAL GRANGE MUTUAL INSURANCE COMPANY, Defendant Turley Insurance Agency, Inc., Third-Party Defendant.

Civil Action No. 08-2022.

United States District Court, E.D. Pennsylvania.

February 3, 2009.

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Michael P. Creedon, Creedon & Feliciani, PC, Norristown, PA, for Plaintiff.

Kenneth M. Dubrow, Bryan P. Werley, The Chartwell Law Office, LLP, Philadelphia, PA, for Defendant.

Joseph P. Connor, Sharon F. Harvey, Connor Weber & Oberlies, PC, Paoli, PA, for Third-Party Defendant.

MEMORANDUM

BUCKWALTER, Senior District Judge.

Currently pending before the Court is a Motion for Partial Summary Judgment filed by Defendant National Grange Mutual Insurance Company ("National Grange") and the Response of Plaintiff CRS Auto Parts, Inc. ("CRS"). For the following reasons, the Court grants the Motion.

I. FACTUAL AND PROCEDURAL HISTORY

A. Factual Background

Defendant National Grange is a business entity insurer. (Compl. ¶ 2.) On March 19, 2001, National Grange entered into an Agency Agreement with Turley Insurance Agency, Inc. ("Turley") authorizing Turley to solicit insurance contracts, issue insurance binders, and collect premiums, all on behalf of National Grange. (Def.'s Mot. Summ J., Ex. 9(B) ("Third Party Compl."), ¶ I.) Under the Agency Agreement, Turley was prohibited from appointing any sub-agent or submitting business from any other producers without the knowledge of National Grange. (Id. ¶ XII(e).) In addition, Turley agreed to reimburse and hold National Grange harmless for "any loss, expense or damage sustained by reason of any violation of the provisions of this Agreement . . ." (Id. ¶ XI (b).)

In May or June 2003, Plaintiff contacted Russell Schaible of Caln Insurance Agency regarding its efforts to obtain commercial insurance coverage. (Compl. ¶ 9.) Upon obtaining policy information, vehicle lists, drivers lists, and lost run documents, Schaible referred Plaintiff to John Turley III of the Turley Insurance Agency. (Id. ¶¶ 12-13.) All of the accurate loss information needed by Defendant to do the proper policy underwriting was provided to Turley prior to June 30, 2003. (Id. ¶ 14); see also Nat'l Grange Mut. Ins. v. CRS Auto Parts, Inc., Civ. A. No. 06-3174, 2007 WL 4078728, at *1 (E.D.Pa. Nov. 16, 2007).

On June 30, 2003, Turley issued an insurance binder, purportedly on National Grange's behalf, to include, in part, worker's compensation and commercial auto liability coverage for CRS. (Compl. ¶ 16.) Prior to issuing that binder, Turley was not advised that he lacked the authority to bind National Grange. In fact, on prior occasions, he had issued binders for National Grange. (Compl. ¶ 19); Nat'l Grange, 2007 WL 4078728, at *1. Moreover, the Agency Agreement granted Turley the authority to bind National Grange to insurance coverage. (Compl. ¶ 18); Nat'l Grange, 2007 WL 4078728, at *1.

On July 10, 2003, Christopher DiPietro and Richard Tilley, were involved in an automobile accident during the course of their employment with CRS. (Compl. ¶ 18; Def.'s Mot. Summ. J., Ex. 12, 8.) As a result of the accident, Mr. Tilley was killed and Mr. DiPietro was injured. (Id.) Plaintiff CRS timely contacted Turley and/or Defendant, on July 11, 2003, to inform it of the accident and advise that there would be workers' compensation claims. (Compl. ¶ 21; Def.'s Mot. Summ. J., Ex. 12.) Pending its investigation of the alleged worker's compensation insurance coverage, National Grange issued Notices of Temporary Compensation to DiPietro and the Tilley Estate. (Def.'s Mot. Summ. J., Ex. 13.) On August 26, 2003, however, National Grange, believing that it had not issued policies of insurance to CRS, sent Notices of Worker's Compensation Denials and Notices Stopping Temporary Compensation to DiPietro and the Tilley Estate. (Id. Ex. 14.) In these Notices, National Grange informed both DiPietro and the Tilley Estate that, "IF YOU BELIEVE YOU SUFFERED A WORK-RELATED INJURY, YOU WILL BE REQUIRED TO FILE A CLAIM PETITION WITH THE BUREAU OF WORKERS' COMPENSATION IN ORDER TO PROTECT YOUR FUTURE RIGHTS." (Id.) Via a Rescinder Letter of the same date, National Grange informed CRS, in part, as follows:

The Turley Insurance Agency did not have the authority to bind any insurance on behalf as the business was brokered. . . .

* * *

A review of the applications supporting material and additional investigative findings reveals that the applications were signed on a date well after the requested effective date indicated on the application and one day after the date of loss. You have acknowledged that you signed all of the applications on July 11, 2003.

Regarding the application for Automobile Insurance you provided inaccurate and incomplete information of previous losses. We have verified over $65,000 in automobile claims that were not disclosed on your signed application. Your signed application also stated that CRS Auto Parts, Inc. had not had any policy declined, cancelled or non-renewed during the last 3 years. This was not true as your prior insurance carrier, Meridian, had notified you that they were non-renewing your Automobile policy. We consider the above inaccuracies to be material misrepresentations.

For the reasons stated above, we hereby rescind any insurance coverage intended to be put in force by your applications, including any binders that may have been issued to you or on your behalf.

(Id. Ex. 15.) National Grange promptly returned CRS's deposit premium of $11,454.00. (Id.)

B. The Initial State Court Action

On July 11, 2005, CRS, along with its parent company, KSI Trading, filed an action against (1) Albert R. Schaible, Jr., Russell Schaible, and Caln Insurance Agency (collectively, the "Caln Defendants"), and (2) National Grange in the Montgomery County, Pennsylvania Court of Common Pleas ("the State Court Action"). In their Amended Complaint, filed July 1, 2006, CRS and KSI sought damages resulting from the Caln Defendants' failure to obtain insurance coverage from National Grange on CRS's behalf and from National Grange's alleged failure to honor its obligations under the purported policy of workers' compensation insurance. (Def.'s Mot. Summ. J., Ex. 1, Am. Compl., CRS Auto Parts, et al. v. Nat'l Grange Mut. Ins. Co., et al., No. 05-18198, ¶¶ 6-35 (Phila.C.P. Apr. 3, 2006) ("the State Court Complaint").) That failure purportedly exposed CRS to workers' compensation and general liability claims by Christopher DiPietro and the Estate of Richard Tilley.¹ (Id.)

The Caln Defendants filed preliminary objections to Plaintiffs' Amended State Court Complaint on March 11, 2008. (Def.'s Mot. Summ. J. ¶ 5.). In addition, they filed a joinder complaint against Turley, on May 23, 2006, claiming that Turley's conduct in assisting in the completion of CRS's application was a direct cause of National Grange's denial of coverage. Id. The state court sustained the preliminary objections and, in turn, dismissed the Caln Defendants' third-party claims against Turley. (Id. Ex. 2.) On February 29, 2008, National Grange filed its answer and new matter in state court and, concurrently, filed a joinder complaint against Turley, to which Turley filed preliminary objections. (Id. ¶ 5.)

C. The Declaratory Judgment Action

National Grange filed a Declaratory Judgment Action against CRS in federal court (the "Declaratory Judgment Action") on July 19, 2006. (Id. Ex. 3.) In that action, National Grange sought a finding (1) that the workers' compensation insurance policy purportedly issued by National Grange to CRS was not in effect at the time of the motor vehicle accident injuring DiPietro and Tilley, and (2) that National Grange was not the worker's compensation insurance carrier for CRS on the date of the motor vehicle accident and, thus, had no duty to indemnify DiPietro and Tilley for any medical benefits. (Id., Ex. 3, at 7.) Turley was not joined as a party to this action. (Id.)

Following a non-jury trial on July 30, 2007, this Court issued Findings of Facts and Conclusions of Law, dated November 16, 2007. In that opinion, the Court determined that: (1) CRS made no misrepresentations, at any time, to either Turley or National Grange; (2) that Turley, acting as an agent of National Grange, issued binders to CRS; and (3) that the insurance binders were in effect and provided coverage to CRS at the time of the accident. Nat'l Grange, 2007 WL 4078728, at *1-2. Consequently, the Court entered judgment in favor of CRS and against National Grange. Id. at *2. On November 28, 2007, National Grange filed a Notice of Appeal to the Third Circuit. That appeal currently remains pending.

Counsel for both CRS and National Grange attended a federal mediation on June 2, 2008, at which time they executed a Mediation Stipulation. In that Stipulation, CRS and KSI agreed to withdraw the State Court Action to allow the recently filed federal action to proceed. (Def.'s Mot. Summ. J., Ex. 6.) Additionally, the parties entered into "a tolling agreement with respect to any statute of limitations defenses limited to claims raised in the State Court action but not to any other claims (which would have otherwise been time barred even if the case remained in State Court)." (Id.) Accordingly, on June 6, 2008, CRS and KSI discontinued the state court action.

D. The Present Action

CRS initiated the current federal action against National Grange on April 28, 2008. In its Complaint, CRS alleges claims of breach of contract, bad faith, and fraud. (Compl. ¶¶ 25-42.) The Complaint further asserts that the acts and/or omissions of National Grange were done with intent, malice, and gross, willful, wanton, and reckless disregard for the rights of CRS. (Id. ¶ 39.) By way of its Answer and Affirmative Defenses, National Grange contends, among other things, that the Complaint fails to state a claim upon which relief may be granted, that...